Some Excerpts of interview of Mr. Ramesh Damani, one of the top investors of our country as published in rediff.com on May 06.

This is a beautiful interview and a must read as it has universal truths and pearls of wisdom.

Let's start with the note 'fearful when others are greedy'. What are the signs to watch out for, when we are getting close to a bear market?
Let me put it this way, most of us in the stock market are actually fundamental analysts. We believe that you look at the price-earnings ratio, the compound annual growth rate, the discounted cash-flow model and those are all very worthy tools used in the stock market. But over a period of time, we need a roadmap on how markets behave?
The financial market existed for over 200 years and they behave in a pattern, a sense of rhythm and there was a gentleman - Joseph Granville, who has come out with a lot of theory behind the stock market's behaviour over a period of time.
Now Joseph Granville was a very well respected technical man in the late 1970s, in fact investors and brokers lived in mortal fear of him, because his sell advisory, buy advisory, could move markets almost a percentage, which is very hard to do for a Dow Jones average.
So he wrote what he called the bear phases or the bull phases of the market and over time they have stood the test of time, they are relevant today as they were relevant when he wrote them, across markets also. So lot of things that I speak today are extracted from Joseph Granville's study of the market.

What do small investors need to watch out for? They are the ones who really burn their fingers most of the time. There are three phases to look out for in a bear market, so what are the symptoms?
Before I do that, the first thing to remember about the stock market is that there are four seasons in the world. We can go from winter to spring to summer to fall. There are only two seasons in the stock market, one is bullish and one is bearish.
And just as we are very certain in the heart of winter that spring will fall in a few months, so there is no reason to be disappointed. So is it with the financial markets, as long as our capitalistic system is surviving and available, after every bear market there will be a bull market.
So the first thing that any investor needs to identify is the trend, ie. are we in a bullish market or are we in a bearish market? As you know from history and from evidence, that in a bull market, 9 out of 10 stocks go up, so the correct thing in the bull market is to remain invested.
Conversely in a bear market 9 out of 10 stocks will go down, so at that time it is very important that you have to decide which stock to hold, which stock to cash after the bull run. But the point is, not to get disappointed in the bear market. The bear market is a time when you sow the seeds to reap the windfall, a few months from now.

(To be continued...)